Category Archives: India

A discussion with Rajan Anandan on #startup trends and the 2020 outlook

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Prolific angel investor, MD of Google India and all around nice guy, Rajan Anandan was at the accelerator yesterday to meet our startups and other investors. He mentioned a few very interesting stats and trends that he gets to view at a macro level from his vantage point.

Along with Sandeep Singhal and Aarti Kapoor we had a chance to talk about key trends that will affect startups in India over lunch.

  1.  Android is growing very rapidly in India and smartphone growth has hit an inflection point (across all brands). The estimate for Indian smartphone growth is there will be 40+ Million new smartphones (of all types) overall this year sold and that compares to an existing base of 25 Million smart phones. So, 65 Million smartphones out of a total of 600 Million unique phone users in India. By 2020, over 350 Million phones will be smartphones in India and most of them will be connected (Compared to only 25M connected smartphones in 2012).
  2. Large brands (not digital companies like eCommerce and others) are now beginning to bring their brand campaigns online and digital is complementing TV and print in a significant way. Over the next 3 years brand spending will move to digital in a meaningful way.
  3. SMB spend online accounts for a small 10% of advertising spend online, but is growing dramatically. Given that some estimates put the # of SMB in India to be 45 Million, even 20-30% of them going online in the next 7 years is a dramatic increase in # of SMB  websites in India.
  4. Video will be a key driver of brand advertising in India. While search is a very powerful performance medium, YouTube has grown by leaps and bounds in India and is also strong growth engine.

What does this mean for startups?

  1. Companies focused on getting SMB’s online with a simple and easy to use product will do well he said.
  2. Since the number of English speaking Indians is much smaller than Indic languages, indic language focused startups will have a very bright future
  3. He also was bullish on the Indian eCommerce market, given that FDI in retail will be addressed at some point of time. Companies that have the wherewithal to last the next few years and grow profitably will be ripe for acquisition in a few years.

The “meaning” metric for your #startup is more important than any other #entrepreneur

I often get questions from startups around the metrics they should track. While I am of the belief that many are immaterial, it is good to gather as many as you can, but only focus on ones that you believe will truly make an impact to your business. Which is hard, because it keeps changing.

Sometimes I do get an enlightened entrepreneur who asks me more existential questions – Why do you think we should exist? Which is the toughest question to ask and answer. It is not that they dont know the answer to that question. They are asking me so they can get a sense of their business and if they are focusing on the right things.

I spent all of yesterday, with 4 tremendous entrepreneurs who are shining examples of social entrepreneurship. I was at the Ashoka Innovators panel trying to see how we can help them scale their organizations.

I used to think that most social entrepreneurs were tree-hugging, not-for-profit, mission-over-business folks. I was also ignorant enough to think that they were all NGO’s.

One young entrepreneur in particular impressed me much.

Shashank, is the cofounder of FarmsnFarmers, a very impressive young entrepreneur, enough to put 90% of the technology startups that I work with to shame with his excellent metrics.

His revenue growth, maturity and the deep understanding of his business impressed me tremendously. I can confidently say he was in the top 5 of the list of entrepreneurs I have met this year, and I have met over 2000 this year alone, in the US, China and India.

In 2 years the business has gone from 0 to over 5 CR ($1 Million) in revenue and will do 15 CR ($3 Million) this year. He and his cofounders are both IIT alums and they are both under 27 years of age.

While the revenue metric is impressive in and of itself, the meaning metric is more mind-blowing.

Their goal is to try and get as many marginalized farmers from the “poverty” line to the “lower middle class” line. A difference of nearly Rs. 5000  - Rs. 8000 ($100 – $150) per month in rural Bihar, which arguably is among the poorest of states.

That metric – the # of farmers they bring out of poverty is their meaning metric. If they do that, then their business succeeds and their revenues will grow as well.

That’s something every startup should focus on, not just those who are social entrepreneurs.

The meaning metric answers the ultimate question – “So What”?

How have people’s lives changed because of what your are building?

Even if you are building a social network or an eCommerce site, I would highly encourage you to find and communicate your meaning metric.

P.S. The # of farmers Shashank & his team bring out of poverty directly correlates to their revenues. Just so you get a sense of ambition, if he tracks on his 3 year operating plan, or even misses by 30%, he will be in the top 50 of Indian startups in 3 years, by revenue growth, in any field, including eCommerce.

Above all, he is a force of good.

Should accelerators in India help entrepreneurs “fail fast”?

I was at Delhi for the TIE India Internet Day, last Friday. Over 400 entrepreneurs, investors and startup enthusiasts gathered at the Sheraton in Saket for a day long session. There were 8 startups chosen to pitch at the event and there was an investor connect session as well.

Alok Mittal chaired a panel with 4 of us including 2 VC’s (Shekhar Kirani from Accel and Sanjay Nath from Blume) and 2 Accelerators (Sameer Gugalani from Morpheus and myself).

There were 3 slides that Alok presented about the maturity of the Indian startup scene, which were to serve as a backdrop for our discussions.

One particular slide generated a lot of discussion. The slide showed that 20+% of companies went from one accelerator to another and from one seed round to another without progressing, which indicated that they were “surviving” but were “living dead”.

Alok’s question was if we were not helping our entrepreneurs “fail fast”?

First off, let me state my bias – “I dont like the concept of fail fast”. Absolutely detest it. Whether its in the valley or India, failing fast is way overrated is my opinion and an excuse for folks not willing to spend more time learning about markets and drilling deeper into the problems faced by customers.

I think there are multiple reasons and subtleties to  the question, specifically in India.

First, Indian entrepreneurs dont take (or dont get) enough money in each round at the very early (angel, seed) stages, since the cost of money is too high. If you are giving up 10%+ at the angel and 25-30% at the seed stage, that money is ridiculously expensive. So entrepreneurs tend to think they can get liftoff with very little funds, and that ends up hurting them in the long run since they go back and dip into the same set of investors for another round, when they realize they are not ready for a significant up round.

Second, Indian entrepreneurs pay a lot more for talent, since startups are perceived to be risky  and so it is not uncommon to see talent getting 110% of their salary with some stock options, since the options are considered “worthless” in India. I know there are some folks that are the exception.

Thirdly, the cost of startup failure is fairly high in India already. Failed startup entrepreneurs rarely start again in India. According to our own research, over 50% of failed entrepreneurs, head back to a bigger company after their venture to pay of debts, “settle down” or bow to social pressure and get a fat paycheck.

Given these 3 arguments, I think it is absolutely important that we nurture our entrepreneurs and ensure they stay very lean until they find the product-market fit or liftoff. That takes a long time in India, thanks to fewer early adopters or paying customers.

Bottomline, “failing fast” is not a mantra we should support or promote among Indian startups, is my perspective.

Delhi entrepreneurs will outsource technology, Bangalore will outsource sales, and Mumbai, everything but finance #startups #entrepreneurs

 

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I put a half serious tweet last week based on several conversations I have had with entrepreneurs in Delhi, Mumbai, Pune, Bangalore and Chennai. I have been to Hyderabad as well, but the numbers are low.

I have limited data, since I am not in Delhi often. My observations are based on looking at 51+ applications from Batch 1 and about 60+ applications from batch 2 of our accelerator from NCR.

Besides that I have interacted in 5 events in the last 6 months at Delhi – Think Next at Saif, Reverse Pitch at 91 spring board, one VCCircle event, one at Leela with people matters and an event of Media companies and startups at Le Meridian. In all at these events I met a cross section of about 120+ companies and founders.

The following are my observations, so use a grain of salt.

1. I met fewer than 5% of developers and technical architects in these events and fewer than 2% of founders from our applications at NCR. The deep technical people dont come to these events or apply to our accelerator. We prefer meeting and dealing with developers, technical folks than generalists such as domain experts, marketing or sales founders. In contrast to those numbers, developers make up 14% of Bangalore applications and Pune a close 10%.

2. Delhi founders dismiss strong technology plays as “engineers building solutions in search of a problem”. This statement is my interpretation of a “show of hands poll” that I did in 2 events.

3. In our internal database of 402 technology and software companies we track at Microsoft based in Delhi, our own biased, internal ranking of “technical” expertise at these companies, our average rating is at 2.9 on a scale of 5. Bangalore and Chennai top at 3.7 and 3.5, followed by Pune at 3.3. I cant share more details about the ratings yet, but will do so as we get more comfortable with sharing this data and not getting people flaming us for that.

While we are certainly not dismissing Delhi as a non-technology startup hub, we certainly dont see deep fundamental technology startups in storage, cloud infrastructure or networking from Delhi. Bangalore or Pune are likely better bets for those. This data was reconfirmed to me by both SAP and Intel who have startup engagement programs in those cities.

India eCommerce future: The “XYZ of the month” Club or Subscription eCommece companies

There are now according to my own count (not comprehensive) about 141 subscription eCommerce companies in the US that send you a package of “stuff” every month – from food to cosmetics, and toys for kids to cigars.

Subscription eCommerce is the fastest growing category of eCommerce according to Internet Retailer magazine.

So will this come to India soon?

There are a couple here already, but none that can solve the logistics problems with any amount of significance.

Which sub categories are ripe for subscription commerce in India?

I think subscription commerce in apparel, books and electronics are fairly niche markets. Whereas food and snacks, daily personal needs and music might be more suited for it.

Who are the likely players? New ones or the existing players?

Given the problems of managing subscription payments monthly (some may take the entire money of the 12 month subscription upfront) I suspect most existing vendors will start to offer this as a service to their partners. Which means new providers in these categories will work with Infibeam, Flipkart, Snapdeal to fulfill their customer’s request. I think there’s room for 1 or 2 good new providers, but the markets they will target will be fairly niche.

How will the new providers manage logistics?

I think there will be a smart local+central logistics player in eCommerce who will start to work this model well and deliver the goods from a local vendor.

What do you think? Any good subscription eCommerce companies in India that you are using? Are they delivering? Are they good? Am I missing any categories?

The Indian startup ecosystem should look at Israel as a role model

I love Israel. Having been there 7-8 times over 5 years when I worked for a company (Mercury Interactive, acquired by HP) that had its development center there, I believe they have some of the best developers, product thinkers and execution oriented folks.

They are also amazing at marketing. They have successfully convinced the world that they are the “startup nation“.

Never mind that they have 1/3 as many product startups as India produces annually and never mind that Indian companies acquire or get acquired twice as much as Israeli companies. Indians also make up 52% of Silicon valley startup founders, whereas Israelis make up less than 8%.

Take a look at those 3 data points and tell me they are not facts. The PWC report is for 2012, so its relatively recent. The # of companies we track in India versus Israel startups in our database is three times as well. The # of companies on Angel list or Crunchbase reveals a similar statistic.

Still its Tel Aviv that creeps up on Silicon Valley as the top startup center. If you read the startup genome report, you’ll be convinced of the same based on their methodology.

What are the arguments I have heard against India being the startup nation?

1. Quantity not quality:  We produce numbers, but not quality. Many of our startups are clones of Silicon Valley companies featured on Tech Crunch 3 months post launch. I looked at the 3 top Israel incubators and found that over 60% of the companies they were helping were clones as well.

2. Exits: We dont have a significant number of $billion or hundreds of million $ exits. I have found that while we do not have those exits, the number of companies listed on the stock market in the US for both Israel and India are comparable.

3. Market access: Israel has excellent knowledge, insights and know-how about US markets. Since Israel itself is a fairly small market, most Israeli entrepreneurs focus on US markets solely, even though they are geographically closer to Europe. Technically the # of people with market knowledge of the US in India far exceeds that of Israel, but they are not in product startups but at large companies.

4. Services mindset & positioning: Thanks to the ginormous success of Indian services companies who helped position India as the “world’s backend” (comparable to China being positioned as the world’s manufacturer) we have been already positioned as low value, low margin, consulting providers.

5. Late start: Even though Israel is 60 years old and India as a nation is a little older, we had a late (2001 or so) start to technology startups. Compared to Israel which had some interesting companies (need references here, what I have heard is mostly anecdotal) in the late 90′s as well.

Why do I still say Indian startups should look at Israel as a role model?

1. They champion their startups very well. They are very well vested in their startups success. They are constantly talking about how good their startups are, how they are possibly better than the valley and why they have the best talent in the world focused on startups.

2. They take significant risky bets. The # of investors in Israel (seed, angel and institutional) is comparable to those in India even though the number of startups is a third.

3. They look out for each other. The community is so well connected with each other that they genuinely look out and help each other. I dont know of any other place that supports their own as much as Israel does.

If you have been to Israel or have lived / worked with Israeli’s please tell me in the comments if there are a few data points I missed.

If you have any good data (not anecdotes, I have enough of those) to counter any of my arguments, feel free to call those out as well.

The goodness from the eCommerce bubble in India

Over the next few weeks and over the last few months, many naysayers have been & will be talking about “why the eCommerce bubble is going to  (or has) burst”.

Its true but misses the point.

Yes, over 21 companies that raised over $500K in funding have “merged” or have “been acquired” for paltry sums.

Yes, the model was unsustainable with discounts ranging from 30-70% off list price.

Yes, end consumers made hay while many institutional investors funded their “free shipping”, “COD” and “no questions asked returns policies”.

I am undoubtedly an optimist, so I see many wonderful first generation entrepreneurs that came out of the ordeal alive.

That can only mean one thing – serial entrepreneurs are for the taking.

Assuming some / most of them start companies again.

Some of them have talked to me about how they learned from the experience and how it will shape their new venture. Others are venturing into investing in startups.

The BEST thing that’s happened to Indian startups in the last 5 years is the rise and fall of eCommerce.

Of the 450+ eCommerce companies (of which 75+ raise some money either from VC or seed investors), a full 63% were first time entrepreneurs. (source: Microsoft India startup research).

That’s amazing. Really awesome.

They will live to tell the tale and venture again.

I have one request though:

The next time you meet an entrepreneur who had started an eCommerce venture and moved on, thank them for taking the risk. They did something so its easier for you to convince your family and relatives that starting a company is glorious. Even if it is not a runaway success it teaches you about taking risks, venturing on your own and going down a not-so-well-trodden path.

Side note: The hare and tortoise story though still has a lot of merit.

I personally know 5 companies in eCommerce, growing at 30-50% annually (not monthly as the VC’s wanted 2 years ago) and breaking even. A few companies chose to not raise capital (or truthfully no one would give them capital when they tried to raise it) were forced to focus on profit and sustaining pricing models. They are stronger and better after their experiences.

Reverse Pitch 22nd Mar, Fri in Delhi, where Investors pitch entrepreneurs

If you are an entrepreneur, you know how difficult it is to keep refining your pitch and answer difficult questions about your market, differentiation, target customer, etc.

Now you get to play jury and judge, in Delhi, to investors both seed and VC.

After 3 successful editions of the Reverse pitch, in Bangalore and other locations, we are now bringing it to the NCR region.

The structure of the event would be 5 minutes demo/pitch by investors and 5 minutes Q&A. The pitch would include Operational Experience, Ticket Size, Sectors, Investment Thesis and Portfolio. The pitch sessions will be followed by networking with investors.
Date: Friday, 22nd March 
Time: 3:00p to 7:00p
Venue: 91springboard, B-1/H-3A, Basement, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi – 110 044, India.
 
Please feel free to reach out to Apurv if you have any questions. You can reach him at (+91) 88006 04703. 

 

Confirmed investors include Saif partners, Lightspeed, Seedfund, Microsoft Accelerator, IAN, Blume, Helion and the Hatch.

You think you are good at something only to find out you are not

There are a ton of people who have written about lack of quality mentorship as one of the main problems in the early stages at Indian startups. In fact, many accelerators and incubators are primarily focused on space and mentorship as the primary offerings as part of their portfolio of services.

Personally over the last 4 years in India, I have helped (I am going to avoid using the word mentor) over 50 entrepreneurs at a superficial level (day long or 2 days of my time) and 6-8 of them to a greater degree with monthly sessions on sales and go to market. Of those entrepreneurs, I financial backed only 6 of them, meaning I funded only 6 companies who needed my money and mentorship. The others I only provided my guidance.

All along, I have heard from the entrepreneurs that I was adding value and addressing their top 3 areas of concern – How to build a go to market plan, how to build a strong sales discipline at their company and helping them by opening doors to key people they wanted connections to. Turns out they were possibly being nice, to me at best.

So I generated a false sense of confidence in being good at something I was not.

I got a hard reality check a few days ago.

Over the last few months I have been helping many entrepreneurs on these exact areas, but without actually putting money in their company.

For most of them, I invested an enormous amount of time (many of them weekly) to help them understand their customers, go to market strategy and for some I helped with a complete re-positioning toward a large adjacent market. For others it was guiding them through funding options, calling a few investors who could be interested etc.

Turns out most of them (not all) only valued advice if they got funded. Else it was “gyan”.

In fact one of them mentioned that they whole point of working with me was to gain access to funding alone. Everything else was gravy.

I have written about this before based on my experience a few weeks ago.

You think you are good at something, only to find out, maybe you were wrong all along.

So, I called and asked a few entrepreneurs who they consider as high quality mentors in India. Surprisingly, only those folks that wrote checks figured on the list for many (again, not all) of them.

Rest were considered as folks who did not have “skin in the game” to help mentor, so they were detached from the outcome or the results of their advice.

There still is a need for high quality mentorship in India is my belief. I am not sure I belong in the high quality category though.

A meetup of Indian accelerators

I had mentioned a few weeks ago that we at Microsoft are putting together a meetup of the top accelerators in India so we can all learn from each other and help each other get better to help the entrepreneur community. Here are more details.

The meetup is going to be held on Feb 1st at the Accelerator and the agenda is driven by the accelerators themselves. It is a closed door event with only invited guests participating and a few members from the VC and entrepreneur community. They are there primarily to help us all learn how we can serve entrepreneurs better.

If you run an accelerator and want to be invited, please drop me an email. There are 40+ people attending from all over India. It will be a day long event with moderated sessions. It is free to anyone that’s running an accelerator or incubator.

Be a force of good.